Tata banks on fibre optic cable to grow revenue

Tata Communications hopes to cash in on the expected surge in Internet traffic as a result of the undersea fibre optic cables to generate income.

The Indian firm anticipates that with the completion of laying of fibre-optic cables throughout the country and the supporting infrastructure, applications such as movie, video downloads and online gaming will be possible and it is betting on this premise to grow its income.

Relying on past experience from emerging markets where such applications have been the key revenue drivers in the telecommunication industry, the firm is expanding its operations in Kenya.

The firm has been in the country for 10 years through its subsidiary Novatel.

But the growth depends on the ability of its customers, such as Internet service providers (ISPs), who act as its intermediaries to offer quality service at an affordable price to end users.

“Supported by high-performance voice and data services we believe our customers will be able to build on their businesses,” said Mr Claude Sassoulas, Europe and Africa managing director during a media briefing in Nairobi last week.

It expects short text message (SMS) users to increase like in Philippines where 26 SMS messages per phone user per day are recorded and their 60 million users account for 50 per cent of all SMS sent annually. A TomiAhonen Consulting study reported that SMS text messaging revenues passed $100 billion in 2008.

Indonesia has the most number of social-networking users in that region and Tata Communications says it is banking on growth of social media users in Kenya once barriers such as latency are removed.

Also Read

Latency refers to the time it takes for data to be transmitted from one sender to the receiver.

Tata Communications, which is one of the largest telecommunication companies in the world and handles 17 per cent of the world’s ISP traffic, says that soon it will be able to reduce latency time from 500 to 170 milliseconds.

The reduction has been made possible due to the switching from satellite-based transmission to fibre-based transmission through the 17,000 km Seacom cable system that went live a few weeks ago.

The telecommunications giant is in charge of the network administration, operations and maintenance of the 1.28 terabytes per second cable.

High speedsTata Communications senior vice president for global IP and VPN [virtual private networks] services, Genius Wong, said firms that have set up capacity that will enable them access high speeds for their business process outsourcing are also assured of better latency.

The completion of the link between Mombasa and South Africa via Dar- es- Salaam will also reduce latency. Previously, South African-bound data had to go to London first then to down south, which reduced transmission speeds.

But there were no promises of cost reductions for end-users because Tata Communications does not deal with them directly as telecommunication operators and Internet service providers are the ones who will determine the prices.

“There is still infrastructure to be built, but we expect competitive pricing by ISPs and this could lower costs to end users,” Mr Sassoulas said.

Mr Joel Nyarunda of OnlineDuka, a local Internet-based comparative shopping platform, says that small and medium enterprises (SMEs) though disappointed by the news that costs may not go down, the upturn of high speeds will make it up.

“Our customers will get value for the service because they will be able to load pages quickly and thus enjoy the service,” he said.

Low speeds have been problematic since they make online-shopping a dull experience as customers have to wait for pages to load.

Mr Nyarunda says that Kenya still has a long way to go even if breakneck download speeds become reality due to a deficiency of local content coupled with lack of access to debit and credit cards lack necessary for online purchases.

Youth’s constitute 70 per cent of the population, but only 26 per cent have access to formal banking as reported by the Finaccess report.

Mr David Karanja of Exemplar Technologies, a firm that specialises in creating ecommerce-enabled websites for SMEs, says that young users can get around the debit and credit card issues through websites that allow for payment through mobile phone payment systems such as M-Pesa.

He, however, said that the current legislation in relation to ecommerce needs to be fine-tuned to seal loopholes which can be exploited by cyber criminals.

“Businesses have to be given guarantees that should there be need for legal recourse, the law can protect them,” the firms Business Development manager says.

Unlike Mr Nyarunda he differed on the pricing issue and is asking the Monopolies and Prices Commission of Kenya to protect small business who are fearful of cartel-like practices given the small number of players controlling the cables.